Above the Fold: Supply Chain Logistics News (June 14, 2019)

By Adrian Gonzalez

You know those signs you see on the side of the road, showing a truck pointed downward on a triangle, warning drivers about a steep downhill up ahead? It’s a beautiful sign when you’re riding a bicycle. It means you can coast downhill with little effort for the next few miles.

But if you plan to ride back up, then that sign is a warning that misery awaits you.

What does misery look like? Exhibit A: the face I made going uphill when I tried to gear down on my bike but realized I was already at my lowest gear.

When I go out for these training rides, I remind myself that whatever discomfort I’m feeling, it’s only temporary. And I also have the freedom to just stop or not ride at all.

My daughter and everyone living with type 1 diabetes, however, don’t have that luxury. The challenges (and sometimes misery) they face are not temporary; it’s every day. And they don’t have the freedom or luxury to stop taking insulin, to stop measuring their blood glucose, to stop thinking about what they eat, to stop carrying supplies everywhere they go. If they do, they die.

That’s why I ride, and that’s why I formed our Logistics Leaders for Type 1 Diabetes Cure Team to raise money for JDRF. To get us closer to creating a world without T1D.

We have 13 riders on the team this year — a new record! We’re riding up to 100 miles in Sonoma, CA; Saratoga Springs, NY; and Death Valley, CA. And we’re raising the bar on our fundraising goal to $80K.

A big thanks to confirmed team sponsors BluJay Solutions and C.H. Robinson. We still have team sponsorships available, along with gear sponsorships. If you’re interested in sponsoring the team or riding with us, please contact me. You can also donate to support any of our riders via our team page (just click on the rider’s name).

Changing gears now, here’s the supply chain and logistics news that caught my attention this week:

FedEx Fires Amazon as a Customer

When your customer looks and acts more and more like a competitor, when do you call it quits on the relationship?

In a brief statement this week, FedEx announced that it “has made the strategic decision to not renew the FedEx Express U.S. domestic contract with Amazon.com, Inc. as we focus on serving the broader e-commerce market.” The company also added that “Amazon.com is not FedEx’s largest customer. The percentage of total FedEx revenue attributable to Amazon.com represented less than 1.3 percent of total FedEx revenue for the 12-month period ended December 31, 2018.”

Amazon had no problem parting ways with XPO Logistics earlier this year. Back in February, XPO warned that it could lose $600 million in revenue this year due to a reduction in business from its biggest customer, which everyone suspects is Amazon. XPO’s share price dropped 14 percent the day of the announcement.

Instead of waiting for Amazon to do the firing, FedEx cut ties instead. And by disclosing that Amazon only represented less than 1.3 percent of total annual revenue, FedEx is basically saying, “You didn’t mean that much to us, anyway.”

The big picture takeaway is that e-commerce continues to transform the role and importance of logistics, especially delivery. Last year, Amazon accounted for 47 percent of e-commerce sales in the United States, according to analyst estimates. However, in updated estimates this week, that share has been reduced to 38 percent. Simply put, there is plenty of pie for FedEx, UPS, USPS, and others to feast on besides Amazon’s piece.

For related commentary, see Amazon: Disruptor Or Distraction?

Tariffs: China and Mexico

It was only a couple of weeks ago that President Trump sent out a tweet threatening to impose tariffs on imports from Mexico starting June 10 if the country didn’t take action to alleviate the flow of migrants. Fortunately, the tariffs never went into effect. As reported by the Wall Street Journal:

After intense negotiations, senior officials from the two countries reached an agreement on measures that seek to contain a surge in migration from Central America. President Trump said on Friday [June 7] his threat of tariffs on all Mexican goods, slated to begin Monday [June 10] at 5%, had been suspended indefinitely.

But as we have seen before, that can all change again with a single tweet.

Meanwhile, on the China tariffs front, “Walmart Inc, Target Corp and more than 600 other companies urged U.S. President Donald Trump in a letter on Thursday [June 13] to resolve the trade dispute with China, saying tariffs hurt American businesses and consumers,” as reported by Reuters.

The article goes on to say, “With less than three weeks to go before talks between Chinese and U.S. leaders, expectations for progress toward ending the trade war are low.”

The bottom line: when it comes to global trade and tariffs, the uncertainty continues.

Legalized Marijuana: Another Challenge in Hiring Truck Drivers

Earlier this year, in one of my Above the Fold video commentaries, I asked the question: How is (will) the legalization of marijuana use impact hiring practices in transportation and logistics?

Apparently, as reported by Roll Call, “American Trucking Associations President and CEO Chris Spear told lawmakers at a Wednesday hearing that legalization of recreational marijuana by states is making it harder for the industry to find drug-free drivers.” Here’s an excerpt from the article:

“Are you seeing in the states that have already legalized recreational use of marijuana even more of a shortage of drivers being willing to take some of the opportunities that are available in the industry?” asked Illinois Republican Rep. Rodney Davis, the subcommittee ranking member.
“Absolutely,” Spear responded. “We have several carrier members that pay the extra expense to do hair testing in addition to the urinalysis, and when the driver comes in and applies and they know they have to take the hair test, a lot of them just walk right out of the door.”

This is a problem that is only going to get worse and more complicated as more states legalize marijuana use.

And with that, have a happy weekend!

Song of the Week: “Fire” by Sara Bareilles